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Where to look for investors for a startup?

post #1 of 11
Thread Starter 
So imagine you have a good idea, a drafted business plan, good people and the basic infrastructure for your startup company. Now where to look for investors?

From what I understand, there are three types of possible investors (in order of ascending money influx):
1. FFF (friends, family and fools)
2. Business angels
3. Venture Capital

Now we're not looking for 1. (don't want to burden those people) and the required investment volume is not big enough for 3., so how do we get to 2.? OK, perhaps there are also business case competitions but these are probably rare (?). We could stem the initial investment ourselves but would obviously prefer the alternative option.


Anybody here with experience in startups, perhaps even having founded one yourself? Tips and suggestions would be great!
post #2 of 11
Quote:
Originally Posted by saint.panda View Post
So imagine you have a good idea, a drafted business plan, good people and the basic infrastructure for your startup company. Now where to look for investors?

From what I understand, there are three types of possible investors (in order of ascending money influx):
1. FFF (friends, family and fools)
2. Business angels
3. Venture Capital

Now we're not looking for 1. (don't want to burden those people) and the required investment volume is not big enough for 3., so how do we get to 2.? OK, perhaps there are also business case competitions but these are probably rare (?). We could stem the initial investment ourselves but would obviously prefer the alternative option.


Anybody here with experience in startups, perhaps even having founded one yourself? Tips and suggestions would be great!
Let me tell you of one extraordinary case my dad has told me. An acquaintance of his presented a investment project to a huge investment bank. The bank turned him down because they only co-partner with people with at least $100mil to invest (short of $50mil) and had no time to hear about his ideas.

What pissed him off is that the person in charge at the bank has ample time to play golf with his clients every weekend at a country club. So with some outstanding networking skills and charisma, he tactfully leaked some ideas to those clients non-chalantly at the golf course. Those clients asked the banker for advice. The banker delved deeper into the investment plan to answer his clients' questions , and everything worked for him.
post #3 of 11
double post
post #4 of 11
Ha Ha ! I have to remember that one!
When my start-up takes off I'm going golfing! ;-)
post #5 of 11
Quote:
Originally Posted by saint.panda View Post
So imagine you have a good idea, a drafted business plan, good people and the basic infrastructure for your startup company. Now where to look for investors?

From what I understand, there are three types of possible investors (in order of ascending money influx):
1. FFF (friends, family and fools)
2. Business angels
3. Venture Capital

Now we're not looking for 1. (don't want to burden those people) and the required investment volume is not big enough for 3., so how do we get to 2.? OK, perhaps there are also business case competitions but these are probably rare (?). We could stem the initial investment ourselves but would obviously prefer the alternative option.


Anybody here with experience in startups, perhaps even having founded one yourself? Tips and suggestions would be great!
Scrap #2 and #3 off the list. There's no such thing as business angels and venture capitalists will find you if they find your idea attractive enough as a profit generating business model.

Friends and family is the best bet. Also try mortgaging your house and maxing your credit cards.
post #6 of 11
Many questions need to be answered that will impact the type of investment, and how much you might be able to get:

1. What type of business is the startup?
2. How much investment are you looking for?
3.What percentage of your company are you willing to part with for that investment (another way to phrase this question is; What's the current value of your company?
4. How will you use the money?
5. What's your exit strategy, i.e. how will the investors make a return on their investment?

The answers to these (and other) questions will have a significant impact on where (and if) you can potentially get investment for your startup.
post #7 of 11
There's no shortage of Nigerians who are willing to bequeath millions to complete strangers...
post #8 of 11
Quote:
Originally Posted by saint.panda View Post
Now we're not looking for 1. (don't want to burden those people) and the required investment volume is not big enough for 3., so how do we get to 2.? OK, perhaps there are also business case competitions but these are probably rare (?). We could stem the initial investment ourselves but would obviously prefer the alternative option.
The poster who said angels don't exist doesn't know what he's talking about. Angels do exist; they're either to people who've been entrepreneurs themselves and who've cashed out, high net worth individuals, or business owners who have extra cash to invest.

The only real way to connect with angels is by networking. Talk to people in your area who've started businesses, especially serial entrepreneurs. Ask for suggestions about who to speak to. Lawyers for medium and large size firms (also patent lawyers), accountants, and consultants may know of clients who are looking to invest money. These angels aren't always who you expect. One large elk rancher I know just did an angel investment in a heavy equipment rental company. Similarly, I once did consulting for an owner of a small hotel chain who was considering doing a small ($250k) technology investment in a technology company.

In large enough cities, there are angel investment "clubs," like Seattle's Alliance of Angels. The people meet monthly and listen to brief pitches from several startups, one after another. They're screened beforehand and generally to get your foot in the door you need to be recommended by one of the members, hence the importance of networking again.
post #9 of 11
Quote:
Originally Posted by AlanY View Post
The poster who said angels don't exist doesn't know what he's talking about. Angels do exist; they're either to people who've been entrepreneurs themselves and who've cashed out, high net worth individuals, or business owners who have extra cash to invest.

The only real way to connect with angels is by networking. Talk to people in your area who've started businesses, especially serial entrepreneurs. Ask for suggestions about who to speak to. Lawyers for medium and large size firms (also patent lawyers), accountants, and consultants may know of clients who are looking to invest money. These angels aren't always who you expect. One large elk rancher I know just did an angel investment in a heavy equipment rental company. Similarly, I once did consulting for an owner of a small hotel chain who was considering doing a small ($250k) technology investment in a technology company.

In large enough cities, there are angel investment "clubs," like Seattle's Alliance of Angels. The people meet monthly and listen to brief pitches from several startups, one after another. They're screened beforehand and generally to get your foot in the door you need to be recommended by one of the members, hence the importance of networking again.
I do know what I'm talking about, since I'm in the business of investment finance. This is what I studied in school and I make my money practicing my craft.

Perhaps I should not have wrote in such absolute terms, but the context of what I try to convey I stand by. My point is straighforward; in order to gain access to seed capital potential investors will not only consider the relevance of your business proposal as an economic viability, but will also put considerable weight to your "risk capital". As a banker or a sophisticated businessman considering providing you financial capital, I'll ask myself "how confident is this individual in his idea?" The only proof that can answer this question without doubt is by how much of the capital has been provided through your own pocket.

And just to clarify, an elk rancher providing capital to a heavy equipment manufacturer or a hotel businessman providing capital to an tech company is totally different to the capital infusion to a "startup" that has not made a dime in revenues. If these same individuals forked out that kind of cash by merely listening to a stranger's business plan on paper, then they're idiots.
post #10 of 11
I'm not sure what kinda start up you are planning but the Canadian government gives funding to high tech startup companies.
post #11 of 11
Thread Starter 
Hey, thanks for all the replies, some excellent points and info in here that I haven't yet considered. Much appreciated.

Now back to the drawing board.
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